Hospital Will Save Money With Bond Refinance

Hospital Will Save Money With Bond Refinance

By David Howell

Editor

WATER VALLEY – Supervisors adopted a resolution Monday to support a request from the Yalobusha General Hospital Board of Trustees to refinance $1.3 million in existing limited obligation revenue bonds, a move that is expected to save the hospital $181,000 during the remaining nine years of the debt service.

The county’s involvement stems from the original bond levy in 2005, when a previous Board of Supervisors pledged to levy up to five mills if the hospital is unable to repay the debt from revenue generated at the facility. Brad Davis, an attorney with Jones Walker law firm helping handle the transaction, explained the hospital has the primary responsibility to repay the debt from revenues generated by the facility. Davis also explained the pledge is a credit enhancement for the bonds, noting the hospital has made all of the payments since the bonds were originally sold in 2005. 

“During the course of the debt service to date, the county has not had to levy or pay anything, all of the debt service has been supported by revenue from the hospital,” Davis told supervisors.

Davis said his firm will handle the issuance of the bonds.

Also speaking at Monday’s meeting was Duncan Williams Invest-ment Bank senior vice-president E.J. Gregory, explaining that his company initially worked with the hospital and county to issue the bonds in 2005.  Gregory also explained that the county’s obligation would remain the same if supervisors did not approve the refinance, citing that the pledge to levy up to five mills is already in place from the initial issuance of the bonds in 2005.

Gregory explained that the terms will not be extended for the bonds.

“You will still be paying them off in 2025,” Gregory told supervisors. The benefit is that the interest rate will be reduced from five percent to an estimated two percent, saving almost $20,000 a year during the next nine years.

“It’s very akin to refinancing your house,” Gregory added. 

Gregory said the $181,000  is a net savings, even after more than $50,000 will be expended for fees charged for the refinancing. That cost includes $19,950  going to Duncan Williams as the underwriter, along with the cost of issuing the bonds totaling $33,250 – money Gregory said will be paid to Jones Walker and Crow Martin LLC,  the state bonding attorney and other fees the hospital will pay.

Following a brief discussion, the vote was unanimous for the transaction.